Deutsche: Europe Is About To Transform Into A Global Exports Monster

Europe's current account surplus is about to surge over the next
few years, forecasts Peter Hooper at Deutsche Bank. One reason is
that everyone wants to pursue exports as an exit from the current
economic challenges. The euro is also likely to appreciate at a
dramatically slower pace than we've seen over the last ten years.

Deutsche Bank:

Chart 6 shows how strongly the “exchange rate” has increased in
the last decade. However, the government debt crisis and
the resultant fiscal consolidation may lead to a smaller increase
in the exchange rate. For our projection of the current account
beyond 2010, we assume that the EMU real effective exchange rate
based on unit labour costs continues to increase in the coming
years but at a slower pace.

Even nations such as France and Spain could join Germany as
net-exporters, with current account surpluses:

According to our model, the current account surplus will
increase to EUR300bn, or close to 3% of GDP, by 2015.
The main drivers of this are the rebalancing within the euro area
and the rising export ratio to the EMs. Chart 10 shows the
projections for the entire euro area. It also shows how the
area’s current account surplus may be allocated across larger
member states. We assumed the deficit countries will rebalance
current accounts and achieve small export surpluses. We further
assume that the surplus countries, in particular Germany and the
Netherlands, will maintain their export orientation.

Which could eventually lead to trade tensions with the U.S.:

The projections clearly suggest that the rebalancing needs of
peripheral EMU countries will eventually challenge the growth
models of the export-oriented surplus countries. The
projected 2015 EMU surplus of close to 3% of GDP is relatively
large. It seems reasonable to expect that the US would urge the
euro area to reduce this surplus.